5/08/2008 @ 6:00AM

The Brighter Side Of Green

Readers of this column will know that I focus on free trade, global supply chains and creative destruction as all being great for America and for the world. But of course I realize that each of these things creates both winners and losers. Even if net jobs are created, or overall standards of living are raised, there are still jobs lost and people displaced.

So I decided to research what is happening from a job perspective, in the “green industries.” And lo and behold, I found a topic that is nearly universally positive. I am not addressing here the potential disaster developing from the growth of corn ethanol, but rather the effects on the economy and the job market from the greater green industry, including biofuels, solar and wind technologies, and derivative products like the Tesla Motors electric car.

First, a few grim facts about oil prices and their economic impact:

Price of a barrel of oil, May 4, 2008

$119.78

Price of a barrel of oil, May 4, 2007

$59.76

Price of a barrel of oil, May 4, 2001

$23.97

Estimated increase in disposable income dedicated to energy spending since the early 1990s

$200 billion

Amount of dollars sent to OPEC countries for crude oil imports in 2007

$135 billion

Amount of dollars sent to OPEC countries for crude oil imports in 2001

$38 billion

In addition, the rapid increase in energy costs has added significantly to the current downturn in the U.S. economy, costing tens of thousands of jobs.

We all know this story, and it’s not a pretty one.

But now for the good stuff. In what seems to me to be a unique confluence of factors, local, state and federal officials, in conjunction with private industry, are creating tax incentives, research and development, and industry creation; that is likely to do many of the things we all want–create sustainable jobs in the U.S., increase energy efficiency, reduce our dependence on OPEC oil and contribute to a better environment.

Is that possible? Consider:

–According to the Solar Energy Industries Association, 2007 was a record year for solar energy, with 314 megawatts of new solar-generating capacity installed in the U.S. This growth pumped over $2 billion into the U.S. economy and created 6,000 new jobs.

–The American Solar Energy Society estimates that the U.S. has 8.5 million jobs in “renewable energy or energy-efficient industries.” With appropriate public policy, which seems to be forthcoming, this could mean as many as 40 million jobs by 2030.

–And these jobs come in a very broad array of industries and activities. In addition to development, manufacturing and installation of wind, solar, biofuel and fuel-cell technologies, there are energy-efficient windows, appliances, insulations and recycling. Then there are city planners, architects and building designers, who are all working to make our cities more environmentally friendly.

How does government help? Consider:

–The U.S. Congress has created investment tax credits for solar and wind energy and has mandated greater use of biofuels (they do need to focus this on non-food products, but that’s for another column).

–At the state level, 23 states have passed renewable-energy standards, committing to renewable energy targets as high as Oregon’s 25% by 2025. The state of California has earmarked $3.2 billion to subsidize solar installation, with the goal of putting solar cells on 1 million rooftops.

–At the local level, Oakland, Calif., spends $250,000 a year on a Green Collar Job Corps to train unemployed workers in fields like solar panel installation and house weatherization, and Chicago has a $2 million green jobs program that trains participants in fields like computer recycling, disposing of chemicals and green landscaping.

And then there is the considerable weight of private industry. Consider:

–In 2007, six new wind manufacturing plants opened in five states, and eight more were announced. Since entering the wind energy business in 2002, GE Energy has created more than 5,000 U.S. jobs and expects to double that in the near term.

–Hundreds of solar energy companies announced expansions in 2007. GT Solar in Merrimack, N.H., is expanding its equipment plant and creating hundreds of jobs. Ausra is building a manufacturing plant for solar thermal equipment in Las Vegas. Schott Solar is building a state of the art PV (photovoltaic) manufacturing plant in Albuquerque, N.M. In Michigan, with the highest unemployment in the nation, Hemlock Semiconductor has invested $1 billion to expand plant capacity dedicated to solar, while Unisolar is creating hundreds of new jobs at six new plants in Greenfield, Mich.

–
PG&E
, the major utility in my local area of California, has recently announced the largest series of solar-power contracts in the utility’s history, to buy 900 megawatts of electricity annually, which will include the building of five plants over the next 10 years. These factories will take an investment of $2 billion to $3 billion; they will create 2,000 construction jobs and about 1,000 permanent jobs to operate the plants.

And finally, there are the traditional venture capitalists. In 2007, these seed investors put $654 million into 33 solar-related deals in California alone, more than double the figure in 2006. Large funds have been established by the likes of Vantage Point Venture Partners and Kleiner Perkins, to create even greater and broader investments. These investments will inevitably lead to new companies and industries, and even greater investment and employment in the United States.

It was a surprise, and a delight, to research this column. Can it get any better than this?

­­­­­­­­­­­­­­­­­­­­­­­­­­­­­And one last thing: In lieu of compensation for writing this column, I would ask that those of you who appreciate any insights I might provide consider making a contribution to the V Foundation, a charity which endeavors to fill a funding gap in cancer research by supporting young researchers who would otherwise have difficulty pursuing a wide range of promising technologies. The charity is named for legendary basketball coach Jimmy Valvano. You can learn more at jimmyv.org.

Michael E. Marks manages a private equity fund, Riverwood Capital LLC, which invests in rapidly growing private companies in North America and emerging markets. Before he created his own fund, he served as a member and then a senior adviser to Kholberg Kravis Roberts & Co. (KKR). Earlier, he served as CEO of Flextronics from 1994 to 2005. Marks now sits on the boards of SanDisk, Crocs, Schlumberger, Sun MicroSystems and the V Foundation for Cancer Research. He also teaches a course in global supply-chain management at the Stanford Graduate School of Business.